Royalty characterization and section 234B interest on non-resident income subject to withholding tax, with partial relief granted.

Payments received from Indian customers were treated as royalty rather than business income because the assessee was found to provide qualitative reports beyond compiling public-domain information, and the Tribunal followed its earlier adverse view in the absence of any contrary ruling from the jurisdictional High Court. By contrast, interest under section 234B was not sustainable against the non-resident assessee because the relevant income was subject to tax deduction at source in the payer's hands, so no advance tax liability arose on that income. The result was partial relief to the assessee, with the royalty characterization sustained and the interest levy deleted.

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Issues: (i) Whether the payments received by the assessee from customers in India were taxable as royalty and not as business income; (ii) Whether interest under section 234B could be charged from a non-resident assessee where the Indian payer was obliged to deduct tax at source.

Issue (i): Whether the payments received by the assessee from customers in India were taxable as royalty and not as business income.

Analysis: The issue had already been decided against the assessee in earlier years by the Tribunal. The assessee relied on later authority to contend that the payments were not royalty, but the facts were held to be distinguishable. The assessee was found not to be engaged merely in compiling public-domain business information reports, but also in providing qualitative reports not available from the public domain. In these circumstances, and in the absence of any reversal of the earlier view by the jurisdictional High Court, the earlier adverse precedent was followed.

Conclusion: The issue was decided against the assessee.

Issue (ii): Whether interest under section 234B could be charged from a non-resident assessee where the Indian payer was obliged to deduct tax at source.

Analysis: The Tribunal followed the settled view that where income is subject to tax deduction at source in the hands of the payer, a non-resident assessee cannot be fastened with advance tax liability on that income. On that basis, the corresponding levy of interest under section 234B was held to be unsustainable.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The royalty characterization was upheld, but the levy of interest under section 234B was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: For a non-resident whose Indian income is subject to tax deduction at source by the payer, advance tax liability and consequential interest under section 234B do not arise; and a prior binding or consistently followed view will ordinarily be followed unless displaced by a superior court ruling on identical facts.

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